IDEAS home Printed from https://ideas.repec.org/a/wsi/rpbfmp/v14y2011i02ns0219091511002263.html
   My bibliography  Save this article

Evidence on Stock Reaction to Market-Wide Information

Author

Listed:
  • Ding Du

    (The W. A. Franke College of Business, PO Box 15066, Northern Arizona University, Flagstaff, AZ 86011, USA)

  • Karen Denning

    (Department of Economics and Finance, Fairleigh Dickinson University Teaneck, New Jersey 07666, USA)

  • Xiaobing Zhao

    (The W. A. Franke College of Business, PO Box 15066, Northern Arizona University, Flagstaff, AZ 86011, USA)

Abstract

The main purpose of this paper is to show that the lack of misreaction to common information in previous research may be due to methodological weakness. As of now, there is no evidence which suggests that stocks under-react to common information at short horizons and over-react at longer horizons. Even if stocks under- and/or over-react to common information at the security level, the reaction pattern may not be evident at the market level if only some stocks have such a pattern and their capitalization is small. We show in this manuscript that the lack of misreaction to common information in previous research may be due to methodological weakness. By focusing on the stock level reaction, we find a statistically and economically significant reaction pattern to common information as the behavioral models suggest. This finding thus complements the findings of stock misreaction to firm-specific information, and may benefit researchers attempting to understand investor behavior.

Suggested Citation

  • Ding Du & Karen Denning & Xiaobing Zhao, 2011. "Evidence on Stock Reaction to Market-Wide Information," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 297-325.
    • Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:02:n:s0219091511002263
    DOI: 10.1142/S0219091511002263
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219091511002263
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219091511002263?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vikash Ramiah & Jacopo Pichelli & Imad Moosa, 2015. "The Effects of Environmental Regulation on Corporate Performance: A Chinese Perspective," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-31, December.
    2. Ding Du, 2018. "The pricing of common exchange rate factors in the U.S. equity market," Review of Quantitative Finance and Accounting, Springer, vol. 50(3), pages 775-798, April.
    3. Vikash Ramiah, 2013. "Effects of the Boxing Day tsunami on the world capital markets," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 383-401, February.
    4. Steve Lim, 2014. "The information content of disaggregated accounting profitability: operating activities versus financing activities," Review of Quantitative Finance and Accounting, Springer, vol. 43(1), pages 75-96, July.
    5. Claire Y. C. Liang & Rengong Zhang, 2020. "Post-earnings announcement drift and parameter uncertainty: evidence from industry and market news," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 695-738, August.
    6. Stefano Gubellini, 2014. "Conditioning information and cross-sectional anomalies," Review of Quantitative Finance and Accounting, Springer, vol. 43(3), pages 529-569, October.

    More about this item

    Keywords

    Market-wide information; intangible information; size factor; behavioral models of asset pricing;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:02:n:s0219091511002263. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/rpbfmp/rpbfmp.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.